Friday, July 16, 2010
5 Steps To Becoming A Trading Champion
Everyone likes to be a winner – it’s one of the few things in life which can be pretty much taken for granted. In practice, however, how many of us have the energy, stamina or physical strength to compete for glory in football, basketball, athletics or etc? Happily, if your talents are more intellectual than physical there are other ways to demonstrate your prowess than physical exertion. Few of these opportunities are more rewarding financially than financial trading tournaments where you compete with fellow traders online for trading success.
These tournaments can give you the opportunity to prove your trading skills to the wider financial trading community and to earn real financial rewards worth thousands of dollars at the same time. In this article I’ll discuss a few key tips which could help would be winners achieve that longed-for place on the champions’ podium.
Step 1: See, follow and copy
One of the most rewarding opportunities to emerge from online financial trading recently is the ability to see in pinpoint detail how other people are trading in the financial markets; live. Thanks to innovative products like eToro’s OpenBook social trading network (http://openbook.etoro.com/), every financial investor can now follow the trading activity of any investor they choose. By doing so it is possible to study the trading strategies of traders you admire as well as interacting with them and sharing strategies and trading tips. Perhaps most appealingly of all, social trading networks like OpenBook offer you the ability to copy the trading positions of any trader you admire, one for one, in real time. This ability can offer a huge boost to the success rates of your trades if you’re still getting to grips with financial trading for yourself. In particular, it can help you boost your ratings within the context of a trading challenge. If there are financial traders out there who you admire, and frankly there should be, tools like the OpenBook offer a powerful way for you to emulate their trading styles and to apply the best of their insights for the benefit of your trading and your challenge ranking.
Step 2: Manage your money
If a financial trading championship had to be compared to a competitive sport the best analogy would be a marathon. Whereas in shorter events it’s the ability to commit everything you have to a single moment which brings you victory, in a marathon your ability to use your reserves over time and across the whole of the challenge will bring you a win. In the same way, to ensure victory in a financial trading championship is about much more than one or two effectively executed and profitable trades. In a trading challenge victory is about the ability to trade effectively over a sustained period of time, and over the whole series of trades you make. Victory does not require that you’re ahead of competitors at every moment, or that all your trades close exactly as you want, rather it reflects the whole of your trading performance across the challenge. In order to succeed it is vital that a trader is able to manage their money effectively. Using up the margin in your account at the start of a challenge by opening too many highly leveraged positions can leave you with nothing left to work with as the competition enters its closing stages. On the other hand, holding back too much when a good opportunity comes your way can also leave you out of the running.
Step 3: Stick to your plans
In general, when you’re financial trading, most of the work that goes into your trading should happen in the preparation stages, before you even execute your trades. Effective preparation will enable you to pinpoint the opportunities that you’re seeking to pursue and the cut-off points where you can best cut your losses or take your profits. Once you’ve made the effort to engage in effective forward planning it is critical to try to stick to the plans which you’ve made. In a financial trading championship, where you are competing directly with other traders, every cent can count. In such circumstances it can be tempting for some traders to let their trades run on after they have hit their profit targets or else their losses have exceeded their stops. Alternatively, too many traders break out of their trades too soon by taking profits in advance of their targets or quitting a losing position well before the stop loss position that they’ve identified in advance. However, it’s almost always the case that the heat of battle is the worst possible moment to make strategic decisions, especially when you’re locked in the midst of the excitement generated by a trading championship. In general, you’ll produce better results by sticking with your original assessment and following the plans you’ve worked to create.
Step 4: Stay faithful to what you know
Competing in a financial trading challenge offers you perhaps the worst possible moment to start experimenting with your trading style or with the assets that you’re investing in. Nevertheless, this is precisely the moment when a lot of traders start doing just that, in the hope of increasing their success rates. When you’re in a challenge, sticking to what you know best, the tried and tested tactics which have worked for you in the past is the surest way to reach your goals. When the results are in and you have the opportunity to reflect, trading challenges offer you a good opportunity to look back on what worked and what did not and to learn lessons which you can apply to your trading in the future. In the heat of the moment, however, it is your ability to be consistent and to work with what you know which is likely to prove your surest path to success.
Step 5: Remember that there’s always another day
A lot of us like to feel like we’re the experts at what we do even from the moment that we first start out at anything new. When it comes to financial trading challenges, however, this attitude can quickly lead you to disaster. No-one in their first days of financial trading should expect to walk away with the winner’s prize from their first financial trading championship. Doing so requires practice and experience – experience of getting things right in your trading and also experience of making mistakes and learning from them as a result. If you are trading in your first challenge remember this. Because online trading platforms like eToro (www.eToro.com) offer you a new opportunity to join a trading challenge every week there is no excuse to get carried away on your first attempt, and open yourself up to the risk of heavy losses from your account as a result. Victory, if it is to be yours, will come from experience, and the willingness to learn by observing how other more experienced traders are achieving their successes. Above all, it will come when the time is right.
By Jonathan Dayan|